EUR/USD, GBP/USD.

Our hopes for local superiority of the British pound on Tuesday dashed, the pace of inflation slowed down. The major indicator – Consumer Price Index – has not changed since October, 0.1%, vs. forecast for a 0.2% growth. On the annual basis it dropped from 2.2% to 2.1%. Retail price Index in November rose 0.1%, in line with forecasts. However, it dropped 0.1% y-o-y. Core output PPI declined 0.1% vs. forecast for being flat.

Pace of inflation declined in the Eurozone as well. Consumer Price Index Core was registered at the level of 0.9% vs. 1.0% in the previous month (y-o-y). ZEW Economic Sentiment and Current Situation indices in Germany were better than expected.

Again the US data surpassed the European data. Consumer Price Index Core grew 0.2% vs. 0.1% in October. US Current Account was better than expected, -$94.8 billion vs. forecast for -$100.5 billion.

Today the Federal Open Market Committee releases its statement, afterwards Federal Reserve Chairman Ben S. Bernanke will hold a news conference. Until yesterday the US macroeconomic suggested the only fact that all the conditions stated by the Fed for the begging of QE3 cut were fulfilled. In fact QE3 program might be trimmed even in summer. Looking back we can see that even if the cut started in June it would not affect negatively the economy and budget. We consider that QE3 cut will be announced today.

Today data on unemployment in the UK in October are to be released. It is forecast to be flat, 7.6%. In Germany IFO Current Assessment in December (forecast 109.7 vs. 109.3). In the US data on Building Permits and Housing Starts both in October and November will be issued at 17:30 UTC+4. The preliminary report suggests that it will be perfect.

We expect decline of the euro to the levels 1.3620 and 1.3540 and the British pound will drop to the target levels of 1.6135/50, 1.6070/85 and 1.5990-1.6010. 

USD/JPY.  

This morning mixed data on Merchandise Trade Balance in Japan in November was released. Trade Balance deficit was -1.29 trillion yen vs. forecast for -1.32 trillion yen. However, it was lower than data in October, -1.09 trillion yen. Adjusted Merchandise Trade Balance was -1.35 trillion yen vs. expectations for -1.19 trillion yen and -1.09 trillion yen in October. Positive data was registered from export, annually it rose 18.4% vs. expectations for 17.9%, thought it was worse than 18.6%. We might be surprised that Nikkei225 grew 1.5%. Probably it happed amid some positive segments of Trade Balance, deliveries in China grew 33.1%, while the rise of the import from China was 19.4%, which helped the Trade Deficit with the major partner, Japan, to drop 2.1%. Shipments to the European countries rose 19.4%, while the import increased by 5.9%.

We consider that in the medium-term perspective the investors will not find reasons to wishful thinking and continuing macroeconomic negative will influence the Japan’s stock market and the yen. We suppose that the yen will decline to the nearest levels: 102.15, 101.65, and 100.95-101.15.